Oil bears the Brent, nears $113 on Iraq violence

SummaryBrent crude was up near $113 a barrel on Monday after a strong rally last week, as Sunni insurgents advanced in Iraq, intensifying concerns over a potential disruption to oil exports from the second-largest OPEC producer.

Brent crude was up near $113 a barrel on Monday after a strong rally last week, as Sunni insurgents advanced in Iraq, intensifying concerns over a potential disruption to oil exports from the second-largest OPEC producer.

The eruption of violence in Iraq led to a spike in prices last week, with both Brent and U.S. crude gaining more than 4 percent - the most since July and December, respectively.

But the rally seemed to run out of steam on Monday as the market waited to see how far oil exports would be impacted. "We've had the initial shock, now we need to see what sort of response there will be from the Iraqis and how successful they will be in containing this," said Ole Hansen, senior commodity strategist at Saxo Bank. "The rally now needs to be supported by real concerns about supply."

Brent crude for August delivery was up 25 cents to $112.71 a barrel by 1108 GMT, after touching an intraday high of $113.28.

The July contract, which expired on Friday, settled 39 cents higher at $113.41 per barrel, the highest settlement level since September 2013.

US oil was up 16 cents to $107.07 a barrel, after reaching an intraday high of $107.54 in Asian trading. On Friday, it rose as high as $107.68 before settling up 38 cents at $106.91 per barrel.

Reflecting on Monday's more modest gains, oil futures brokers and analysts said it looked as if the move up last week had been overcooked.

"There seem to be some grounds for thinking that the government in Baghdad may be able to restrict the ISIS civil war," one said. "But while the Kirkuk-Ceyhan pipeline is out of action I don't think we will see prices fall much more."

"Brent should correct the lion's share of its latest price rise," Carsten Fritsch, an oil analyst at Commerzbank in Frankfurt, said in a note.

"Nonetheless, the threat of civil war ... does justify a risk premium given that the anticipated growth in Iraqi oil production may fail to materialise on account of the unstable security situation and an unwillingness to invest as a result."

On Sunday Sunni insurgents seized a mainly ethnic Turkmen city in northwestern Iraq after heavy fighting, solidifying their grip on the north. For the moment the immediate threat to Iraq's oil supplies - most of which are hundreds of miles south of the fighting - remains limited, analysts and consultants say. Northern exports have